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Chinese Online Game Co Perfect World's 1Q Profit Jumps 42%Font size: A | A | A
6:48 AM ET 5/17/10 | Dow Jones
DOW JONES NEWSWIRES

Perfect World Co. (PWRD) first-quarter earnings rose 42% as the Chinese online game developer and operator saw stronger revenue.

Looking ahead, the company projected second-quarter revenue growth of 14% to 20% to RMB594 million to RMB625 million. Analysts polled by Thomson Reuters recently expected revenue growth of 29% to $98 million.

Although the company had some technical complications during some major updates on a recently launched game, Chairman and Chief Executive Michael Chi said Perfect World solved the problems and is working on a soon-to-be launched major expansion pack with a lot of enhanced content. The company has also been signing new licensing agreements with game operators abroad.

Use of online games has been booming in China. Total revenue in China's online game industry grew an estimated 42% last year to about $3.8 billion, according to Beijing-based research firm Analysys International, which in January predicted the figure will jump to $10.7 billion by 2012. Though China has nearly 400 million Internet users, that still leaves huge potential market growth.

Perfect World reported a first-quarter profit of CNY305.2 million ($44.7 million), or CNY5.75 an American depositary share, up from CNY215.5 million, or 3.96 an ADS, a year earlier. Excluding items such as share-based compensation, earnings rose to CNY6.16 (90 cents) from CNY4.25. Analysts expected 84 cents.

The conversion to U.S. dollars is based on exchange rates in New York as of March 31.

Revenue surged 47% to CNY625 million. The company in March forecasted CNY620 million to CNY644 million.

Operating margin fell to 51.7% from 54.2% as operating costs jumped 55%.

At Perfect World's domestic business, the average number users on Web games at the same time rose 62% while the number of customers increased 14%. Average revenue per customer was up 25%. Average simultaneous users and the number of customers tumbled sequentially amid the technical complications and seasonal factors, though average revenue per customers rose 37% month to month.

Overseas licensing revenue improved 11% from a year earlier, but was down sequentially as the company didn't introduce and new games overseas during the quarter.

Perfect World in March agreed to acquire online-game company C&C Media Co. from Atlus Co. (J.ALU) and other holders for about $21 million, as Perfect World aims to capture more of the Japanese market. It also recently acquired a majority stake in Runic Games Inc. of the U.S. and continues to seek acquisition opportunities.

ADSs closed Friday at $32.94 and didn't trade premarket. They are down 16% this year, more than the broader market.

-By Tess Stynes, Dow Jones Newswires; 212-416-2481; Tess.Stynes@dowjones.com;